Following through on his pledge made in December 2017, Governor Larry Hogan has unveiled legislation and other measures to protect Marylanders from state and local tax increases resulting from the recent federal tax overhaul. He also announced that the administration will take immediate steps to address health insurance rates set to skyrocket as a result of dysfunction and inaction in Washington, D.C., and will work with the Maryland General Assembly to develop common sense solutions to protect health care coverage for thousands of Marylanders.

“For three years, our administration has been singularly focused on helping struggling Maryland families, restoring our economy, and delivering relief for Maryland’s beleaguered, long-suffering taxpayers,” said Governor Hogan. “We simply cannot afford to slam our state in reverse and return to the days of burdensome, crippling tax hikes. Our administration is fully committed to doing everything we can to reduce the impact of this federal government-imposed tax burden on Marylanders.”

A comprehensive analysis of the impact of the federal legislation on Maryland state taxes and taxpayers by Comptroller Peter Franchot concluded that, while most Marylanders will see their federal taxes decrease by an aggregate $2.8 billion, state and local taxes will increase by a projected $572 million in fiscal year 2019 if no action is taken. This increase results from the loss or reduction of several longstanding federal deductions and exemptions, including: state and local tax, or SALT, deductions; certain deductions for mortgage rates and home equity lines of credit; and charitable deductions. The comptroller’s analysis found that the increase would impact nearly 800,000 Marylanders and be disproportionately felt by middle-class taxpayers.

After weeks of work by the administration’s economic advisors and staff, in conjunction with the comptroller’s office and private sector experts, the governor unveiled the following actions to hold Maryland taxpayers harmless:

First, the governor announced the Protecting Maryland Taxpayers Act of 2018, which makes permanent a provision in Maryland law that prevents changes in the federal tax code from affecting Maryland state and local taxes. The legislation will enable Marylanders who choose to take the standard tax deduction at the federal level to itemize deductions at the state level, whereas currently taxpayers opting to take the federal standard deduction also have to do so at the state level. This provision will make it possible for Marylanders to get “the best of both worlds” by taking advantage of the higher federal standard deduction while still utilizing longstanding deductions at the state level.

The bill also addresses an additional potential $1.2 billion tax increase Marylanders could face in fiscal year 2019 as a result of changes to personal exemptions and ambiguity in state law. The governor stressed the need to find a legislative solution to this ambiguity, rather than subject Maryland taxpayers to the confusion and uncertainty of potentially differing legal opinions.

“Let me be very clear – under our proposed legislation, Marylanders will not pay one cent more in state taxes as a result of the actions as the federal level. Our legislation ensures that this money will remain in the pockets of hardworking Maryland families and small business owners,” said the governor.

Secondly, acknowledging that multiple legislators have put forward proposals to address this issue, the governor called on the Maryland General Assembly to work with his administration to devise a collaborative solution. The governor named Budget Secretary David Brinkley, Labor Secretary Kelly Schulz, Health Secretary Bobby Neall, Chief Legislative Officer Chris Shank, and Senior Advisor Keiffer Mitchell – all of whom joined him for the announcement – to work directly with legislative leaders to negotiate an agreement that both the administration and the legislature can support before the Fiscal Year 2019 budget is passed.

The governor also called on the legislature to work with his negotiation task force on another critical issue facing the state as a result of actions – or inaction – in Washington: the impending massive increases in health insurance rates of 50 percent or more due to Congress’ inability to fix federal health care laws. Rates, which have been increasing for Marylanders for nearly a decade as a direct result of changes to federal health care laws, are set to skyrocket due to dysfunction and gridlock preventing Washington policymakers from developing solutions.

The governor directed his task force to collaborate with legislative leaders to develop common sense, bipartisan solutions to stabilize the insurance markets and protect Maryland’s Medicare waiver. Failure to do so would jeopardize health care coverage for thousands of Marylanders, along with $2 billion annually for the state.

“Very simply, it seems that neither political party in Washington – Republicans or Democrats – have the will or the ability to fix these problems, but our state will address them head-on. These issues are much too important and the impact is too far-reaching for us to risk getting it wrong,” said Governor Hogan. “Nearly every day, we see the effects of divisive rhetoric and political polarization in Washington, but in Maryland, we have chosen a different path. No problem faces us that hard work, honesty, and courage cannot solve if we work together.”

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